Failing Health Care Co-ops Will Cost Taxpayers

Consumer Operated and Oriented Plan Programs (COOPs) were really a political compromise between Members of Congress who wanted a public plan option and those who didn’t. Once the Affordable Care Act passed, COOPs had outlived their usefulness. However, they are now failing and will cost taxpayers plenty. Senior Fellow Devon Herrick testified before a congressional committee.

Suing Gun Makers

"Chicago claims it spent $433 million in the previous five years on police, emergency medical care and other costs associated with guns violence."

When Mayor Rendell was considering whether Philadelphia should sue gun makers, the Bureau of Alcohol, Tobacco and Firearms (BATF) collected information and shared it with Pennsylvania's state police in an unprecedented fashion.11 The data showed that of the 38,000 handguns legally purchased in Philadelphia in 1996, 17 percent, or approximately 6,460, were sold to just over 700 individuals - each of whom bought more than five handguns that year.12 David Kairys, a lawyer originally consulted by the mayor, concluded that either many of these purchasers were buying guns on behalf of criminals or unlicensed black-market gun dealers were reselling legitimately purchased handguns to ineligible persons.13

The Chicago Lawsuit. Both overall serious crime and murder rates have dropped in Illinois in general and Chicago in particular, but not as fast or as far as in the nation as a whole. While the national murder rate declined 9 percent in 1997, Chicago saw less than a 4 percent decline.14 The Illinois murder rate has fallen only 19 percent since 1993, compared to 30 percent nationally.15 Nearly 500 people die in Chicago each year from gunshot wounds.

Chicago has some of the strictest gun laws in the country. Handgun sales and the private ownership of any handgun not registered before March 30, 1982, are illegal. However, handgun sales are still legal in the suburbs and, according to the lawsuit, suburban sales are the source of Chicago's problems.

Chicago sued gun manufacturers and others on November 12, 1998, for $433 million the city claims it spent in the previous five years on police, emergency medical care and other costs associated with gun violence. The lawsuit, building on the work that David Kairys did for Philadelphia, alleges that the gun industry oversupplies suburban gun shops, knowing the guns will be sold unlawfully to Chicago residents. This oversupply of guns is a public nuisance analogous to noxious factory emissions, the lawsuit alleges. It also claims that manufacturers advertise gun characteristics that appeal to gang members and other criminals. Among these characteristics are concealability, affordability, fingerprint resistance and the capacity to fire highly destructive ammunition.16

In addition to gun manufacturers and wholesalers, the suit names 12 licensed gun dealers as codefendants. These dealers had sold guns to undercover Chicago police who, the city claims, made clear to the sellers that the guns were being purchased for criminal purposes, by one person on behalf of another or for resale to criminals.

The Hamilton Suit. The lead plaintiff in Hamilton v. Accu-Tek, the lawsuit filed by tort attorney Elisa Barnes, was Freddie Hamilton, a New York mother who lost her teenage son, Nunzi Ray, to a bullet intended for another teenager.17 The accused shooter in the Nunzi Ray killing was acquitted in a criminal trial.

Ms. Barnes claimed gun manufacturers distribute a dangerous product in a negligent manner in that they do not track firearms from production to final destination in criminal hands. Various gun control advocacy groups (e.g., the Center to Prevent Handgun Violence and Handgun Control Inc.) declined to join with Ms. Barnes in the suit because, in contrast to traditional negligence cases, she was not going after a particular gun, traced from a particular crime back to a specific manufacturer.18 She responded that this had been tried and had failed in previous negligence cases against gun makers.

A more important reason why Ms. Barnes did not sue just the gun manufacturers is that the police identified the gun involved in only one of her plaintiffs' cases. None of the manufacturers Ms. Barnes sued had guns tied to these cases. Indeed, Ms. Barnes could not even show whether the guns used against her clients' loved ones were bought from gunrunners by criminals or bought over the counter by lawful gun buyers, then stolen by criminals. Ms. Barnes relied on three critical factors to make her case: a sympathetic judge, testimony from a gun company insider and data on gun sales.

"A previous suit pioneered the theory that manufacturers' liability could be based on market share."

She successfully fought to have the case assigned to semiretired judge Jack Weinstein because he is widely known for his pro-plaintiff solutions to mass injury lawsuits and his penchant for judicial lawmaking. In fact, he presided over an earlier birth defects suit Ms. Barnes brought against manufacturers of the antimiscarriage drug DES. In that case, Judge Weinstein pioneered the theory that in rare circumstances, when consumers were unable to identify the particular makers of a product which had caused harm, manufacturers' liability could be based on their market share.

Her faith in Judge Weinstein's willingness to make new law was vindicated early. In a preliminary ruling, Judge Weinstein declared, "[There may] come a point that the market is so flooded with handguns sold without adequate concern over the channels of distribution and possession that they become a generic hazard to the community as a whole because of the high probability that these weapons will fall into the hands of criminals and minors."19 Judge Weinstein also allowed Ms. Barnes to expand her plaintiff group to 11 from two.

Ms. Barnes hoped that testimony from Robert Hass, a former senior vice president for marketing at Smith & Wesson Corp., would prove that the industry knows many of its guns end up in the hands of criminals via black market sales from federally licensed but largely unsupervised firearms dealers. Hass and the BATF both acknowledge that manufacturers do cooperate with the BATF when responding to a request to trace a specific gun. However, Hass claims that the industry, using internal records, could do more to track suspiciously high-volume gun sales to specific retailers - especially when evidence emerges that guns sold by a particular retailer are regularly linked to violent crime. When this occurs, Hass claims, the companies could halt sales to the suspicious dealers. [See the sidebar: The Structure of the Firearms Industry.]

"The plaintiffs funded a study that found a pattern of gun smuggling from states with lax gun purchase laws to states with relatively strict laws."

Third, Ms. Barnes hired corporate consultants National Economic Research Associates (NERA) to search government statistics and reports on guns for evidence of trends. NERA found a pattern of gun smuggling from states like Florida with relatively lax laws to states like New York with relatively strict laws concerning gun purchases. In addition, NERA concluded that more handguns were sold in less restrictive states than could be expected given the levels of legitimate gun ownership, supporting Ms. Barnes' claim that gun makers knowingly oversupply gun markets with low regulations.

The MacArthur Suit. The MacArthur Justice Center's suit (Young v. Bryco Arms, Inc.) was brought on behalf of the families of three victims of handgun violence in Chicago.20 This suit was more focused than the ones brought by the mayors or Ms. Barnes, since it aimed only at the manufacturers of the guns actually used to commit the crimes cited - Smith & Wesson Corp., Navegar, Inc. and Bryco Arms, Inc. - rather than the gun industry as a whole. The victims had two things in common: they were young and they died as the result of gang shootings:

Andrew Young, 19, was killed by two gang members who mistook him for a member of a rival gang.

Salada Smith, 24, was the innocent victim of a drive-by shooting (she was several months pregnant at the time).

Robert Owens, 15, was killed by a 12-year-old white with orders to kill a couple of black people.

The arguments made in Young are similar to those made in the Chicago lawsuit and in Hamilton. The plaintiffs in Young argue that the manufacturers should be held financially responsible for gang violence because "[the defendants] creat[e] and suppl[y] a vast, illicit, underground market in handguns in order to meet the demand for weapons of gang members and juveniles."21 As in the Chicago suit, the plaintiffs' claim that the manufacturers design guns for and market them to gang members is based on the characteristics claimed for the guns.

The Structure of the Firearms Industry

Unlike many other industries, the automotive industry for example, the firearms industry is not vertically integrated - manufacturers do not sell firearms directly to the public and they do not own retail franchises or finance retail purchases. Accordingly, it would be difficult for manufacturers to track gun movements from the factory to their final legal delivery point.

The firearms industry has four commercial components: manufacturers, importers, wholesalers or distributors and retailers. There are more than 75 major domestic firearms manufacturers - those producing more than 500 guns per year - in the United States. There are also hundreds of foreign gun makers, many of whose wares are imported to the U.S. There are several relatively large importers of firearms and some U.S. gun manufacturers act as importers for foreign gun product lines. There are more than 70 full-line distributors (i.e., companies that sell handguns, long guns, ammunition and shooting sport-related merchandise) in the U.S., as well as other wholesalers that distribute only a single product line or specialty items. Finally, although the number of licensed gun retailers has fallen from 270,000 in 1994, the current number of 105,000 is still considerable. Except for certain importers, there is no exclusive sales arrangement between particular retailers, wholesalers and manufacturers. In other words, guns manufactured by one company might be sold to any of more than 70 large distributors, then resold to any of the 105,000 dealers. No manufacturer has any reason for knowing where an individual gun or allotment of guns shipped to a distributor is eventually sold through a retailer.

Retailers, distributors and importers must all be licensed to operate in the U.S. by the Bureau of Alcohol, Tobacco and Firearms (BATF). Before the BATF issues a dealer's license it subjects the applicant to a rigorous background check and fingerprinting, collects a fee and imposes other criteria. The BATF also has strict guidelines for firearms operators concerning the sale and storage of firearms and the paperwork or documentation required. Finally, the agency polices both the public and firearms licensees by (1) tracing the chain of sales from the factory to the wholesaler to the initial retail sale of particular firearms at the request of law enforcement authorities, (2) carrying out on-site inspections of firearms licensees and (3) conducting undercover investigations to curb black market sales.

In the Hamilton case, Joseph Vince, a former BATF agent, testified that firearms dealers worked closely with the BATF to fight illegal gun trafficking. He testified, "If [the dealers] see something that is suspicious, they will contact their local BATF office and report that information." He said such cooperation was common and that the dealers are the BATF's "eyes and ears."

The former head of New York's joint city and federal task force on guns and crime testified in Hamilton that gun manufacturers and dealers cannot reasonably be expected to combat illegal gun trafficking since such work is dangerous, should be conducted only by authorized law enforcement personel and might interfere with undercover law enforcement efforts.